CARACAS, Venezuela, Feb. 16 — Faced with an accelerating inflation rate and shortages of basic foods like beef, chicken and milk, President Hugo Chávez has threatened to jail grocery store owners and nationalize their businesses if they violate the country’s expanding price controls.
Venezuela’s collectivist dictator Hugo Chavez is surprised by the fact that there are shortages in Venezuela. Despite the fact that the science of economics has been explaining it for over two hundred years, he didn’t know that inflation of the money supply serves to make prices rise. Again, despite the centuries-long teachings of economics, he didn’t know that when the rise in prices is prohibited, the effect of inflation is to increase the quantities of goods that people want to buy, but not the quantities available for sale, and thus results in precisely the situation that is described as a shortage, i.e., people attempting to buy more of a good than is available for sale.
Chavez doesn’t know, and probably doesn’t want to know, that if he wants to end the shortages, all he has to do is abolish the price controls. The rise in prices will serve to reduce the quantities of the various goods demanded to a point within the limit of the supplies available. He doesn’t know and probably doesn’t want to know that if he then wants the rise in prices to stop, all he need do is stop the inflation of the Venezuelan money supply.
Finally, Chavez doesn’t know, and undoubtedly doesn’t want to know, that if he would then want prices actually to fall, and for goods to become more and more affordable by more and more of his countrymen, what he would need to do is make a 180-degree turn in the rest of his policies. What this means is that he would have to replace his policy of socialization/nationalization with privatization, and his policy of ever increasing regulation and controls with economic freedom. These are the polices that would provide the incentives and opportunity to rapidly increase production and thus make goods more and more abundant and thus lower-and-lower-priced and ever more affordable.
But all of this is way too much to expect. Because this is, after all, the same Hugo Chavez who apparently slept through the collapse of the Soviet Union and of socialism almost everywhere in the world but Cuba and North Korea, where it’s still maintained by dictatorship in the face of starvation. As such, he’s a man who gives new meaning to the expression “out of itâ€â€”he’s so far out of it, so incredibly ignorant, that one may wonder what century he’s in and what planet he’s on.
What stops the antics of this collectivist throwback from being laughable is the fact that people are suffering from them and soon will probably suffer a lot more. Large numbers of Venezuelans may even be killed before this buffoon leaves office.
This article is copyright © 2007, by George Reisman. Permission is hereby granted to reproduce and distribute it electronically and in print, other than as part of a book and provided that mention of the author’s web site www.capitalism.net is included. (Email notification is requested.) All other rights reserved. George Reisman is the author of Capitalism: A Treatise on Economics (Ottawa, Illinois: Jameson Books, 1996) and is Pepperdine University Professor Emeritus of Economics.
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chavez is a military style socialist dictator. don’t forget that he participated in a coup a few years back and has now done everything in his power to ensure his stay in office indefinitely. it hurts to hear about his backwards policies being put in place.
He didn’t know? What, was he educated in a public school or something?
I hope that the U.S. government does not further intervene in the internal affairs of Venezuela so that the blame for the disastrous results of Chavez’s socialist economic policies and dictatorial politics is placed exactly where it belongs, on him and his followers, and no one else.
The interventionist policies of the U.S. provide a convenient, but erroneous, excuse for third-world socialist governments, yet another reason for this country to pursue a morally correct and constitutional non-interventionist foreign policy.
I liked very much the point in the post that Chavez does not want to know. In the end, it is always the same, “they do not know what they do”. A Brazilian colleague of mine, an “economist”, is an advisor to Chavez, he should know otherwise. But doesn’t he know better? No, he does not want to know better. So the saying in the Bible should actually read: “They do not want to know”, and then the precourse about “Lord forgive them”, sorry to say that, also does no longer apply.
Venezuala could really use an Augusto Pinochet right about now. By the time Chavez is done, Venezuala will likely be more backward than Cuba.
Why do people insist on calling Hugo Chavez a dictator? He is an immensely popular, democratically-elected ruler of his country. That he is also a socialist wrecker that will plunge the country into barbarism should be a convenient opportunity to condemn democracy.
Have any of you actually been to Venezuela?
I have. I saw the social impact of Chavez’s policies. Where there was once misery and poverty there is now hope and poverty is being eradicated. Since Chavez came to power the average life expectancy of the country has increased by about four years. The population now has free healthcare, social housing, free dentistry, free education at all levels and the most democratic constitution on the planet. Can you recall your president? Poll after poll after poll for the last 9 years has shown that Chavez is not only popular, but his popularity is steadily increasing.
If capitalism cannot provide food at decent prices then capitalism is the problem. Only a democratically controlled economy will meet the needs of the people.
“Why do people insist on calling Hugo Chavez a dictator? He is an immensely popular, democratically-elected ruler of his country. That he is also a socialist wrecker that will plunge the country into barbarism should be a convenient opportunity to condemn democracy.”
These are good points, especially the comment regarding democracy.
However, I would add that a reasonable test as to whether the term dictator applies is the degree to which the civil and economic liberties of those not in political power are acknowledged and protected.
As a reminder, Hitler was initially democratically elected and for a considerable time was quite popular among most of the citizens of Nazi Germany.
Mike, you are a hoot. Why don’t you actually live there? After all, you believe everything is free! Talk about the deal of a lifetime… and yes, if I believed what you believe, I would move in a heartbeat.
How painfully predictable and sad.
Nothing, except possibly air, is free. Mr. Chavez is simply taking from some to give to others. The comments regarding Venezuela’s supposed progress somewhat remind me of the great “progress” made in the Soviet Union under Lenin and Stalin.
And democracy, since it contains no intrinsic recognition and protection of civil and economic liberties, is fundamentally mob rule, the law of the jungle. Contrast democracy to the market economy and its political counterpart classical liberalism/libertarianism, where private property and the derivative concepts of civil and economic liberties are the rule. In the market economy, production and exchange are driven not by a gun but by voluntary social cooperation under the division of labor.
I would also add that since Venezuela is a major oil producer, it has benefited greatly from the large increase in the worldwide price of oil since the late 1990s.
I, too, am worried about Venezuela, an really became concerned the moment the legislature basically rolled over and said Chavez could rule by decree. At that moment, the stage was set for full dictatorship. No man, no matter how much he wants to bring his people out of poverty, will be able to resist the full use of the terrible power he has just been granted. Those same people will likely die by the millions, and it sounds like he’s going to start with, as always, the entrepreneurs. That said, I agree that the United States Government should do absolutely othing, save give Venezuelans preferential treatment in immigrating to America during the coming Reign of Terror.
Still the best idea for US policy against Socialists and Communists. Perhaps we’ll actually take the professor’s advice this time.
Dr. Reisman wrote in this article (which hasn’t yet appeared on his blog):
He gives Chavez’s rationality far too much credit. This is a man who believes in the conspiracy theory of history. Every event in the world at any time has something to do with the United States, and none can escape its malevolent clutches. The allegedly perfect system of Socialism/Communism can only be destroyed by the work of evil, and who can be more evil than the nation explicitly founded on the opposite ideas?
Mr. Brabson is quite right that Venezuela could really use a Pinochet (i.e. a Cincinnatus) about now, but I can’t see any on the horizon.
“The population now has free healthcare, social housing, free dentistry, free education at all levels and the most democratic constitution on the planet.”
Did these things suddenly drop out of the sky?
Venezuela is a vampire economy: Chavez and his cronies are siphoning resources away from investments and distribute it to their political clients.
Price of oil has been important factor which has enabled Chavezian government to stay in power and also increased its popularity. I dont doubt that majority of his supporters honestly believe that he can deliver all the goodies which he has promised. Reality will be quite different than his supporters are expecting…
I dont understand this affection which many people have with the strong leaders (Caudillo idea in South America). They believe that all problems can be solved if the right man has enought power to make changes. This idea has nothing to do with the race of the people; many others also believe that.
Socialists dont generally understand economics; they just think it has something to do with the class war and distribution of incomes is not an economic question. When they are challenged they resort to ad hominems and say that opponent is just bourgeois economist with false capitalistic ideas. Gramsci and Bukharin created this type of attack against western economics.
Mike: “If capitalism cannot provide food at decent prices then capitalism is the problem. Only a democratically controlled economy will meet the needs of the people.”
Good points. But I wouldn’t call the system before Chavez capitalism. People think that is you’re not a declared socialist, you’re capitalist. That’s a common mistake promoted by the socialist media. Of course, it benefits socialism is they’re allowed to call every corrupt form of government capitalist. But Venezuela before Chavez was far from being capitalist. It was a tradition economy in which the property rights of the rich and politically powerful were protected, but those of everyone else were trampled upon. Douglass North has a good description of tradition economics. Even though a country might be a democracy, those in power maintain there power base by stealing from the opposition and giving to supporters. Chavez is doing the same thing now.
Had Venezuela been a true capitalist society, the poor would have benefited far more than they have under Chavez. Eventually, Chavez will have stolen as much as he can from his opponents. Then what will he give the poor?
I would suggest that Chaves knew what would happen when price controls are mixed with inflation. He’s creating a scapegoat that not only deflects the blame he deserves, but creates an excuse to nationalize (steal) even more private property.
Mike, To follow up on my previous post, here is a quote from North about what he calls “natural states”, which is what I called traditional economics:
“Natural state’s create property rights to the exclusive use of land, labor, and other valuable resources, as well as rights to perform valuable economic functions, such as trade. These rights are only available to members of the dominant coalition. Limiting access to rights increases economic rents associated with the rights. The rents bind particular constituent groups to the ruler because they have something to lose if the ruler is replaced. Creating a wide range of rents allows the ruler to create a support constituency potentially capable of both maintaining power and supporting the wealth associated with specialization and exchange. The natural state therefore establishes and enforces a property rights system, whereby specific groups with specific ties to the ruler have specific rights and privileges (e.g., a group is granted the exclusive right to trade in cloth). The ruler protects the rights and privileges against encroachment by others. The ruler has incentives to honor these rights, because constituent groups whose rights are infringed can punish the ruler by withdrawing their support, thereby lowering the probability
he survives.” Available at http://www.international.ucla.edu/cms/files/PERG.North.pdf
The Venezuelan rulers before Chavez used state-owned oil to reward friends, punish enemies and maintain power. Chavez is doing the same thing. I only wish Venezuela could have a taste of real capitalism, as Chile has.
Chavez is not the source of Venezuela’s problems.The socialist model, corrupt Latin American variety, was in place long before Chavez, though previously its administrators were primarily an aristocratic, consciously “European”
educated elite to whom the fruits of graft and corruption (as well as the separateness of the classes) were as natural as air and sunshine.
I spent 3 weeks there in ’78 and a month in 1980 but apart from arrival and departure from Caracas
and another total of a few days in Ciudad Bolivar, the rest was spent ‘way up on Rio Caroni
in the Guayana Highlands. not far from Angel Falls; we were on a glorified camping trip adventure we called “prospecting.” It’s really wonderful country, if somewhat difficult and infertile (in a comparative sense).
Even back then, Chavez posters (“he walks with the people”–barefoot prints in the dust of a
primitive town street such as those in “spaghetti westerns”) were everywhere, even in remote villages of 100 or less (you could hit a bunch in a week via Aeropostale–for $50 or less).
The place was an obvious economic “basket case” even then. They have the world’s richest, most easily mined iron ore, close by Guri Dam on the lower Caroni–a source of abundant hydroelectric power. Yet they have to tarrif Japanese steel heavily, just to keep theirs in business (Japan has virtually no domestic ore and imports scrap from everywhere).
I had brought (and “smuggled in” with the help of a gov’t.-connected friend) a standard 12-ft
rowboat, purchased here in NJ new for $200. In the interior, I had no trouble trading it “even-up” for a 10-meter “curiare”–an enormous freighter of a dugout canoe, capable of hauling us five and an (actual) ton of equipment and provisions–the product of months of expert craftsmanship.
South of the border, in Mexico, you’re in “manana” land. Venezuela is exactly the same, except more so. No schedule is any more than approximate (in most cases, with an allowance of a couple of days). In a city like CB, the mayor’s residence would have a contingent of 20-30 young, automatic-weapon-toting thugs guarding it, most lolling about, lying on the porch. The city has parking-meters in the commercial district and gaggles of sharp-looking male and female uniformed parking police. Walking in knots, they physically obstruct sidewalk traffic, though good-naturedly, in the main. Worse is the degree to which they clog space in the coffee shops and luncheon-type places. A dozen of the more intimidating types guarded an unused concrete pier on the Orinocco (at which a missionary friend sometimes tied up his houseboat). There are checkpoints along many roads (manned by the same type) protecting against something or other (communists, someone told me) but beyond being nasty to people with tinted windows (a sure sign of political questionability) or demanding they remove their sunglasses, no one seemed to have any idea of what they were actually in place to detect or prevent. I’ve been told that, in Caracas, the situation is worse because, in addition, wealthier folks have their own little gangs of “security.”
The striking thing observable in CB is how few Venezuelans are in any form of business. Everybody in business seems to be from somewhere else: some asians but mostly Turks, Arabs from several places, Italians, Greeks, and several others–all said to have originally “jumped ship.” Starting with suitcase-displays on the streets, then small shops and stores, it is said that they all sell out to a successor in 10 years or so and “retire” to Caracas. The same with small truck-farming of vegetables for the restaurant trade: all foreigners, no Venezuelans (though some are in cattle-ranching in the vast, swamy grassland.
In those days, gasoline was 1.25 – 1.50 here, I think I remember. In Caracas, the pump price was 17 cents–said to be a subsidy for the poor (though most of the poor didn’t have cars). I never knew the tariff on autos but remember it was said that transportation and tarrif would double the U.S. price.
After we left, my friends and I were vilified in the Caracas papers supporting Chavez and occupied their legislature’s attention for a time. We were described as “North American mining interests” said to “exploit indigineous peoples” (we’d hired a couple local pemon Indians as guides) and “use forced child labor” (one of our guides asked us and we said “yes”–to bring his 5 and 8-year old boys). It all fizzled shortly but was brought up all over again a year later, at which time they kicked out a missionary with whom we’d been friendly. We gave him our 16-gauge Mossberg, so they might have got him for “trading in armaments”.
To sum it up, it’s a great place except for the people–like a lot of other places.
People think that is you’re not a declared socialist, you’re capitalist.
You know, Roger, you hit the nail in the head. That false dichotomy permeates the mayority of Latin Americans. That is why it becomes so hard to get rid of bad policies in many countries – the more conservative or more libertarian leaning people end up voting for the guy that is not a self-declared socialist, even if the guy is a big-time statist to the core; you know, like the Republicans.
It just happened in Mexico, for instance. The newly elected president, Felipe Calderon, is now toying with price controls, subsidies and other crass interventions of the market, even when his political platform was, supposedly, less statist than that of his former rival, Andres Manuel Lopez.
Francisco, Yeah. It’s socialist ploy and the socialist press promotes it by inventing “crony-capitalism” and “state-capitalism”, none of which are capitalism. Very few capitalist countries have ever existed.
Have you read any of Ibsen Martinez’s columns on Latin America over at Econlib.org? They’re full of insight.
From Google define:COLLECTIVIST
A person who belongs to the political left
Subscribing to the socialistic doctrine of ownership by the people collectively
From Google define:DICTATOR
A ruler who is unconstrained by law
A ruler who is not restricted by a constitution, laws or any opposition.
A ruler with absolute power and authority, especially one who exercises this power and authority tyrannically
Do these definitions not describe Chavez, the “COLLECTIVIST DICTATOR” of Venezuela?
Mike, thanks for your edifying post, it explains why East Germany was so much better off than West Germany, and why they had to build a wall to keep out the envious.
I liked the ‘Buffoon’ part; it captures the situation quite well.
“The population now has free healthcare, social housing, free dentistry, free education at all levels…”
Yep, Santa Claus Economics at work here!
Cheers,
MCLA
How ironic, isn’t this the same Hugo Chavez that met with the Iranian president recently looking to limit oil production to push up its price?
Is it the same socialist-collectivist Hugo Chavez that is encouraging the price gouging of oil over the rest of the world through his own monopolistic capitalism conspiracies to control output?
I think that Hugo needs to live up to his own word and put a price control on Venezuela’s oil — how about a very reasonable $40?
Guys, I don’t like the cartelization of the business (nor its nationalization in so many places) but a certain unpleasant fact needs to be faced squarely.
That is the realization that the chief impetus for the rise in prices was not cartelization, except indirectly. The rise in prices (and the perceived need to cartelize) are both perfectly rational responses to the constantly-diminishing purchasing power of the outputs of the producers.
The long-ago price of Saudi crude was in the $1.50 to $2 range–roughly about 40 grains of gold at then-prevailing levels. A barrel of oil is 42 gallons and it won’t hurt if we just round and fudge very slightly–I”m not even exact on the long-ago price, but not far off.
Just a few calculations will show that, at the now-prevailing price of gold, the price of oil is
quite close to what it was back in the early 1920s. I first did that calculation in 1972–at the time of the first gas crunch actually caused by a more serious move–an embargo. Guess what–the same thing was true then! In the interim between the 20s and the 70s and then the present, many of the methods for extraction and processing have grown more efficient, as has the transportation and even delivery to the pump–all tending toward lower prices, somewhat accentuated by increasing known reserves, with the offsets (price-increasing influences) in the shape of actual consumption and depletion.
Long story short: the man in the street (in his car) ain’t got beef one with the A-rabs–it’s his own gov’t. and its inflating ways that he should be concerned about. And, why shouldn;’t the Saudis
and the Venezuelans (and everyone from whom we buy) be on the lookout for “funny money.” You know we would, as well. That’s the whole intent of doing it in the first place–to fool people, even if temporarily, to behaving somewhat differently than they would if they knew the true state of affairs.
Whether Chavez is a dic (or even a prick) ain’t what’s important (except insofar as he’s damaging his own country’s well-being). The oil price may be temporarily a bit out of whack but it can’t be by very much. And the fact that production hasn’t been curtailed all that much and the price doesn’t seem about to plummet should tell us something: gold’s probably got another 2-3 hunnert in it, even short-term (1-2 years).
gene: “…the man in the street (in his car) ain’t got beef one with the A-rabs–it’s his own gov’t. and its inflating ways that he should be concerned about.”
Excellent point! Americans seem to think that oil should remain at $30/bbl forever, no matter how much the Fed floods the world with increasingly worthless paper! Few people connect Nixon’s destruction of the gold exchange standard in 1971 with the jump in oil prices in 1973 or 1979, or again in 2000. All the oil producers want is an honest currency in exchange for their oil. The US has failed miserably at providing it. Oil producers have done nothing more than raise prices in order to keep up with the loss in value that the dollar experiences every year.
Chavez rigged his elections? So says an independent study group in this article: http://www.nysun.com/article/48925
Looks like Jimmy Carter should stick to raising peanuts. He certainly knows nothing about elections!
Brabson: “Venezuala could really use an Augusto Pinochet right about now. By the time Chavez is done, Venezuala will likely be more backward than Cuba.”
Black Bloke: “Mr. Brabson is quite right that Venezuela could really use a Pinochet (i.e. a Cincinnatus) about now, but I can’t see any on the horizon.”
Oh, surprise surprise, there are fascists posting on the “Libertarian” Mises site, and nobody far and wide contradicts them? And I was beginning to believe, at least for a moment, after reading some Robert Higgs, that “Libertarian” ideology in America is not necessarily synonymous with the axiom “government has no business working for the good of the people; its only purpose is bombing/intervening in foreign countries and torturing prisoners.” You are really, really a sad bunch of hypocrites.
You’d do well to read some more Reisman piglet.
General Augusto Pinochet Is Dead(December 16, 2006)
More on Pinochet and Marxism: The Necessity of Evil Means to Achieve Socialism(December 21, 2006)
Where The New York Times Is Coming From(December 29, 2006)
I think you’re imagining pacifism and not rational self interest.
Black Bloke and the rest, how do you reconcile your sympathies for fascist dictators with your avowed hostility to government in principle? You needn’t answer, folks. You have been honest and I appreciate that. Everybody who wants to know what “Libertarians” stand for just has to go to this blog and read for themselves.
They’ll even see evidence of “callousness” [the U.S. should just let Venezuela go down its sorry path, rather than intervening.]
What typical asinine idiocy from Reisman.
haha, delayed much? I google’d your profile. The least you could do is explain the basis of your comments. The google search was useful, I now know where you’re coming from but I’m sure you could articulate your position better with only the slightest bit more effort than you exerted in declaring “asinine”.
I see from my search that the theories you base your statement on are different that the theoretical structure Reisman follows. Perhaps detailing the theoretical grounds for your statement would spark and enlightening discussion. Perhaps you’d be swayed to a new conclusion, perhaps you would sway others to your point of view. Unfortunately, all we have is “asinine”.
Oh well, perhaps the future holds opportunities for intellectual discussion with you but until then I won’t hold my breath.
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